On 30 April 2024, CDL Hospitality Trusts (“CDLHT”) have announced their first quarter business update for 2024. There are also no DPU updates for this quarter, although management have disclosed that net property income has improved overall by 6.8%, mainly contributed by the Singapore hotels. Whether this translates to DPU improvement will have to be seen in the half year result announcement. Metrics relating to debt have slightly worsened, although for now unlikely to have any major negative impacts.
Website: General Announcement::Operational Update for the First Quarter Ended 31 March 2024
Background
CDLHT is one of Asia’s leading hospitality trusts. It comprises CDL Hospitality Real Estate Investment Trust (“H-REIT”), a real estate investment trust, and CDL Hospitality Business Trust (“HBT”), a business trust. CDLHT was listed on the Mainboard of the Singapore Exchange Securities Trading Limited on 19 July 2006, with H-REIT being the first hotel real estate investment trust in Asia (ex-Japan).
H-REIT’s principal investment strategy is to invest in a diversified portfolio of income-producing real estate, which is primarily used for hospitality, hospitality-related and other accommodation and/or lodging purposes (including, without limitation, hotels, serviced apartments, resorts, motels, other lodging facilities and properties used for rental housing, co-living, student accommodation and senior housing) globally.
HBT’s principal investment strategy is to invest in a diversified portfolio of real estate or development projects, which is or will be primarily used for hospitality, hospitality-related and other accommodation and/or lodging purposes (including, without limitation, hotels, serviced apartments, resorts, motels, other lodging facilities and properties used for rental housing, co-living, student accommodation and senior housing) globally and may also include the operation and management of the real estate assets held by H-REIT and HBT.
CDLHT is managed by M&C REIT Management Limited and M&C Business Trust Management Limited, subsidiaries of Millennium & Copthorne Hotels Limited, an internationally recognised hospitality group, which owns and operates hotels globally.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Info | +1.2% |
Based on the announcement on 30 April 2024, DPU was not included in the business update for the first quarter of 2024.
As of 31 December 2023, This metric was Favorable as DPU for 2023 has increased by 1.2% to SGD0.0570 per stapled unit from SGD0.0563 for the previous financial year.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | No Info | No Info |
Based on the announcement on 30 April 2024, occupancy rate was not included in the announcement.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 37.8% | 36.7% |
Gearing ratio decreased to 37.8% as of 31 March 2024. The metric currently remains Favorable as it is a distance away from the MAS limit of 50%. It is however not far from an assessment of metric shift.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 2.7x | 2.7x |
The interest coverage for the trailing 12 months remains unchanged at 2.7 times. The overall metric remains Neutral as the interest coverage is lower than my preference of 3.0 times. This may worsen as the Federal Reserve on 2 May 2024 has signalled that US borrowing costs are likely to remain higher for longer, as it wrestles with persistent inflation across the world’s biggest economy. This was after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Federal Reserve chair Jay Powell signals interest rates will remain higher for longer
As the interest rate may potentially increase further, CDLHT may be subjected to significant change in their cost of debt in the near future. Sensitivity analysis as below using the information as of 31 March 2024:
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $1,198,800 |
| Debt Not Hedged (%) | 49.0% |
| Debt at Floating Rate Exposed | $587,412 |
| Distributable Income FY2023 | $70,970 |
Interest rate sensitivity analysis as below:
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| + 50 bps | -$2,937 | -4.1% |
| + 100 bps | -$5,874 | -8.3% |
| + 150 bps | -$8,811 | -12.4% |
| + 200 bps | -$11,748 | -16.6% |
| + 250 bps | -$14,685 | -20.7% |
| + 300 bps | -$17,622 | -24.8% |
Do note the above is my estimation which may be different from management’s estimation. Nonetheless, if the interest rates were to increase by the basis points above, CDLHT may experience a fall in DPU accordingly.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 2.0 years | 2.2 years |
Weighted average term to maturity of their debt shortened to 2.0 years as of 31 March 2024. This remains Neutral as it has been hovering around the 2.0-year mark. However, it may be reassessed as unfavorable if it shortens any further.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.65 | 0.68 |
Based on the announcement on 30 April 2024, Net Asset Value (“NAV”) was not included in the business update for the first quarter of 2024.
The Price to Book (“P/B”) ratio currently stands at 0.65. This is computed using the closing share price of SGD0.975 on 17 May 2024 and the net asset value per share of SGD1.50 as of 31 December 2023. The P/B ratio is Favorable.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.27% | SGD 0.032 |
| 2023 | 6.26% | SGD 0.061 |
| 2022 | 5.23% | SGD 0.051 |
| 2021 | 4.78% | SGD 0.047 |
| 2020 | 6.53% | SGD 0.064 |
| 2019 | 9.34% | SGD 0.091 |
Dividend paid out in the first half of 2024 amounted to SGD0.032 per share. When annualised, the expected dividend payout for 2024 will be SGD0.064 per share. With a closing share price of SGD0.975 as of 17 May 2024, this translates to a dividend yield of 6.54%. For my benchmark, a general reasonable range would be around an average of 5.50% to 6.50%. CDLHT is above the range and the dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q2
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | No Info | Favorable |
| Occupancy | No Info | N/A |
| Gearing Ratio | 37.8% | Favorable |
| Interest Coverage | 2.7x | Neutral |
| Debt Maturity Profile | 2.0 years | Neutral |
| Price to Book Ratio | 0.65 | Favorable |
| Overall | | Favorable |
Overall, the metrics indicate that it remains favorable to invest in CDLHT. CDLHT still have room for recovery, as they are some distance from their pre-Covid 19 dividend yields and currently trading at a discount from their book value. This should provide some buffer for capital appreciation in the future.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Previous Post
Website: CDL Hospitality Trust (SGX: J85): 2023 Full Year Result
One thought on “CDL Hospitality Trust (SGX: J85): 2024 First Quarter Business Update”
Comments are closed.